Why E-Books Won’t Hit the Bargain Bin

By Quentin Fottrell

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The Justice Department’s investigation into e-book price collusion won’t have a happy ending for readers, analysts say. Digital reading may even get more expensive.

Amazon and other merchants would be allowed to discount e-books under a proposed settlement between officials and publishers (although Apple and several publishers reportedly resist the deal.) That sounds like a win for consumers, but some contend if prices to go down – it won’t be for long.

However fast the U.S. Department of Justice moves, the industry will move faster, says Bob Young, CEO of self-publishing platform Lulu.com. “It will have zero impact on prices and on the availability of books,” he says. Young says big publishers won’t want to sell their most popular and profitable non-fiction books at prices that will significantly undercut the price of their paper editions. However, if e-books begin to overtake print ones, that may no longer matter.

Publishers will more likely be very choosey about what books to offer at a steep discount, Young says, and for how long. “Romance and detective stories may become cheaper,” he says, “but this won’t happen with educational books and they make up the bulk of the publishing industry.” He says the latter includes everything from science, legal, and economics textbooks to diet and self-help titles. Publishers can move the prices of e-books up and down like airline tickets, based on demand. There may be occasional headline-grabbing flash sales on blockbusters, Young says, but they could last just days – or hours.

The pricing of e-books by publishers has long been a subject of government scrutiny. The European Union’s antitrust watchdog is also probing a half-dozen publishers who sell e-books through their “agency pricing model.” Here’s how it works: Five major publishers reportedly agreed to the same pricing scheme and then let retailers act as agents for each sale, taking 30% and returning 70% to the publisher. The logic being: while it may cost less to sell an e-book over a paper copy, the time spent by the writer creating the book — and marketing department selling it — remain the same.

A ruling against Apple, which has not dramatically cut prices on iTunes, might also encourage more of the world’s biggest authors to pull a JK Rowling and sell their e-books directly to readers. Rowling set up her own virtual bookstore to sell digital editions of her Harry Potter series for between $7.99 and $9.99. But that might not lower prices either.

To be sure, e-book consultant Alina Adams, says any ruling that breaks alleged price-fixing is a win for the consumer. “Those books that are available will cost less,” she says. Currently, bestselling e-books sell for around $12.99 — not so different from the price of paper editions, which are costlier to produce and distribute.

However, industry players say this settlement may hurt smaller e-book publishers more than the big players, and ultimately result in less competition. “Consumers will have lower prices in the short term, but in the long term it’ll force some e-book retailers out of business which will lead to less competition, higher prices for consumers and lower earnings for authors and publishers,” says Mark Coker, founder of Smashwords.com, one of the world’s largest distributors of self-published e-books. He says this could make e-books more popular for cheaper, less popular titles — but not for bestsellers.